Last week, Sir Stuart Rose sent shivers through the City when Marks & Spencer reported downbeat sales for the Christmas period.

Interestingly though, Sir Stuart pointed out that London outperformed the rest of the UK. The M&S chief executive said he had “never seen such a polarised economy” between London and the regions. Sir Stuart’s comments were backed up yesterday when figures from the London Retail Consortium revealed that retail sales in the capital rose 7.1 per cent in December. This compares with a national rise of just 0.3 per cent.

Many other retailers have echoed Rose’s comments, with many London stores weathering the storm, while the regions feel the full force. Many new retailers to the UK – such as Uniqlo and Massimo Dutti – learnt of the polarised markets the difficult way by expanding too rapidly into the north of England and then having to pull back to a core number of stores in London and the Southeast.

Property prices in London look likely to rise as this trend continues. While some shopping centres are offering massive incentives for retailers to sign up and spaces in more secondary areas can lie vacant for months, retailers have to bid for units in central London and six-figure premiums are bandied around in the blink of an eye.

London’s Oxford Street remains hot property. Despite the east end of the street remaining drab and unkempt, retailers are increasingly desperate to find the perfect space. The trend that saw Uniqlo pay a substantial sum to get the former Waterstone’s unit and Shellys give up its corner spot at Oxford Circus when it was given an offer it couldn’t refuse from Italian retailer Tenezis seems set to continue this year.

Health and beauty retailer Superdrug is understood to be shifting from its spot on Oxford Street to make way for a new River Island flagship. The fashion retailer is thought to be so keen to create a dramatic new flagship that it also offered neighbour Borders a price to leave its store, but they wouldn’t budge.

At the other end of the street, Inditex is expected to take the former Gap unit to house two of its brands – possibly Massimo Dutti and, new to the UK, Pull and Bear. Offers for that space came in thick and fast and Inditex had to fight to secure it.

Meanwhile, Bond Street and Regent Street also remain buoyant. The former Ungaro unit on Bond Street has had luxury retailers lining up, although it has not been signed so far.

And on Regent Street, most of the re-developments have been filled and any retailer that shows a slight sign of moving off the street is immediately pounced on.

As most retailers point out that the outlook for 2008 will remain cautious, the outlook for property in the UK will also remain cautious. As London sales could fuel some retailers, it may well also fuel the property industry.